Speculation continues to rage that the state pension triple lock will be watered down or axed altogether to avoid an "unaffordable" pay rise for UK pensioners. Initial reports some weeks ago suggested the triple lock would go when it became clear that pensioners were in line for a bumper pension increase from April 2022. Downing Street now appears to be doubling down on plans that would ensure a potential 8% increase in the state pension don't happen.
Speaking on Wednesday, a spokesperson for Prime Minister Boris Johnson said, “I think we recognise the legitimate concerns about potentially artificially inflated earnings impacting the uprating of pensions. Any decision on future changes to the triple lock will be taken at the appropriate time based on the latest data, and of course we will continue to support older people, while ensuring future decisions are fair with pensioners and taxpayers. No decisions have been made.”
A commitment to the state pension triple lock is enshrined in the Conservative Party's manifesto. However, the government appears to be banking on its core voter base accepting that the circumstances around Covid-19 that have led to talk of an 8% rise in the state pension are unprecedented.
This is certainly an argument the Chancellor, Rishi Sunak, has been making to Downing Street for some time. In recent weeks, Sunak has made several statements in which he’s repeated his desire for 2022’s pension increase to represent fairness for both taxpayers and pensioners.
Sunak has reportedly told Johnson and the Cabinet that allowing an 8% increase would amount to between £4 billion and £5 billion of unplanned spending in the next financial year. The Chancellor has also said this money would need to be clawed back from other departments and spending priorities were the increase signed off.
The Chancellor has options, but which will he choose?
It seems likely that UK pensioners will see their state pension increase by 3% - 4%, rather than 8%, in April 2022.
Sunak is reportedly considering two options that will deliver such an outcome:
- Averaging earnings from the previous two years when calculating the increase within the triple lock. Given wage growth was zero in 2020 when enormous numbers of people were furloughed, this would claw back half of the final proposed growth sum.
- Reverting to the old double lock system, which did not consider wage growth. Under this scenario, the April 2022 state pension increase would be the higher of 2.5% or September’s inflation figure.
The government will be at pains to point out the unprecedented circumstances under which the triple lock may be tweaked. However, critics and cynics will undoubtedly question whether such an approach may be taken in the future should any potential increase be deemed unaffordable.
Holiday refunds scandal sees trust in travel firms sink
A consumer survey from Which? has revealed the extent to which people have soured on certain holiday companies during the Covid-19 pandemic. It was widely reported last year that many holiday firms were flat out refusing to give refunds to customers, a practice which was quickly reported as illegal.
While 70% of people surveyed by Which? said they would book with the same company again in future, there were some significant splits across firms.
For example, while over 80% of Hays Travel, Jet2, and Saga customers said they'd happily book with the same company in future, this dropped to around half for Ryanair and Teletext Holidays. Teletext Holidays, and its sister operator Alpharooms.com, found itself subject to a Competition and Markets Authority (CMA) investigation last year that led to them being ordered to pay back customers.
Lack of trust and satisfaction seeing customers go elsewhere
Customers who said they wouldn’t use the same firm again cited a lack of trust as the main reason for their decision. Nearly two-thirds of Ryanair package holiday customers said they felt they could no longer trust the brand. Overall, 51% of respondents said lack of trust was the main reason they wouldn’t use the same company again.
Many customers questioned by Which? also cited dissatisfaction with alternative arrangements made in place of their holiday and said this would make them look to another firm the next time they were looking to book.
Customers urged to consider potential travel restrictions before booking
Which? Travel editor Toby Boland encouraged consumers to be mindful of possible travel restrictions before booking a trip with any provider. Boland was also pretty damning about the failure of some firms to learn lessons from the past 18 months or so.
Boland said, “With international travel still fraught with potential risks that could leave holidaymakers unable to travel as planned, trusting that a company will refund you if things go wrong will be vital to encouraging customers to book in the near future.
“A considerable number of companies do not seem to have learned lessons from last summer’s disruption though, and continue to offer holidaymakers limited financial protection if their holiday is disrupted by changing travel restrictions or being told to self-isolate.
“It’s important that travellers do their research before booking a holiday while coronavirus remains a risk, to check whether their holiday provider will leave them out of pocket if they cannot travel when the time comes.”
Shared banking hub trial extended to address access to banking fears
Trials of shared banking hubs in two UK communities that have lost all their bank branches have been extended for 18 months.
Cambuslang, South Lanarkshire and Rochford, Essex, are currently benefitting from the presence of these hubs, which are managed by the Post Office. The shared banking hubs offer a range of services, including:
- Over the counter banking services and enquiries
- Business cash depositing
The hubs allow staff from different banks to attend one day a week to help with tricky or confusing transactions. Meanwhile, the hubs remain open during the week for more straightforward services like depositing and withdrawing cash.
The government is currently undertaking a consultation process as it considers plans to protect banking services in small and rural communities. Concerns about access to cash have grown during the Covid-19 pandemic, with bank closures accelerating and cash machines being taken out of operation while increasing numbers of shops refuse cash transactions.
Other potential solutions considered or subject to trials include:
- Using churches to facilitate community access to cash
- “Click and collect” cash withdrawals from shops
- The ability to get cashback at local shops without making a purchase
Hubs proving popular in the community
Unsurprisingly, both hubs have proven to be popular in the communities in which they are situated. It is thought over 12,000 residents across both locations have used the hubs, a number sure to grow with the trials now extended to October 2023.
"It is really clear that the hubs have been hugely popular and it would be a bad decision to close them. The banks have therefore taken the view that they want to keep them open, and keep innovating in them so we can refine the model further," Natalie Ceeney, who oversees the trials, told the BBC.
Banks involved in discussions with cash access laws likely
While banks continue to close unprofitable branches in communities across the UK, they remain engaged with the government regarding these trials and other initiatives to protect access to banking services and cash.
It seems likely that the government will legislate that everyone should not have to travel “more than a reasonable distance” to deposit or withdraw cash. While this is part of the ongoing consultation process, the initial distance suggested was 1 kilometre. It has also been floated that the distance may increase if cash use in the UK continues to fall. However, if access to cash continues to be difficult for many, this could create the illusion of cash becoming less popular, thus making the problem even worse.
Other factors being considered within the existing consultations include:
- Whether banking facilities are appropriate for vulnerable people
- Accessibility for people with disabilities
- Whether the opening hours are adequate and suitable for those needing to use the services
- Venues suitable for making secure, high-value deposits and withdrawals
Monthly house price growth drops for the first time in 2021 amid record annual highs
Online property portal Rightmove reported the first monthly fall in house prices in 2021. The average price of a property coming to market in August is down 0.3% on July but is still £337,371!
However, this drop is driven by the reintroduction of stamp duty and a fall in demand for larger properties. While the overall price drop is underpinned by a 0.8% fall in asking prices for four-bedroom properties, two-and three-bedroom homes remain at record high prices.
This trend is borne out by a report in the Daily Mail this week, which highlighted that house price growth hit 13.2% year-on-year in June, delivering the fastest such increase since 2004. According to the same report, the average house price in the UK is now £266,000 versus £231,000 in June 2020.
Numerous factors driving monthly drop, but prepare for a swift rebound
August is traditionally a slower month for property sales and a fall in prices, with families away on holiday. Even with more people staying at home this summer than usual, thanks to ongoing Covid-19 travel restrictions, the property market is experiencing its familiar mid-summer trend.
Jeremy Leaf, of London estate agent Jeremy Leaf & Co., told the BBC, "A reversal was hardly unexpected after the government started to taper the stamp duty holiday at the end of June.
"But when you drill down more deeply into the figures, you see more of what we are finding at the coalface, such as an improvement in demand for smaller houses and flats."
Nick Barnes of Chestertons said that there was also noticeably fewer properties coming to market at present. While many sellers may have decided to stay put now life is returning to something like normal, or don’t anticipate demand now stamp duty applies once again, the lack of supply is likely to drive a rebound in property price growth during the rest of the year.
The “new normal” continues to be a trend-setter
While last year was characterised by a rush to coastal and countryside locations, this trend has evened out a little, albeit people still aren’t necessarily hurrying to buy in town and city centre locations. Still, what the long-term reality will look like is what continues to drive property trends.
Tomer Aboody, of MT Finance, envisages the current trend of flexibility in work continuing, with people opting to buy homes that provide a balance of affordability while providing an acceptable commuting distance if necessary.
Aboody told the BBC, "Buyer demand remains strong, especially in the more affordable areas outside of London where space is generous for incoming buyers who are partly working from home and have the flexibility of travelling.
"This, in turn, is driving up prices in these areas."
Meanwhile, Rightmove said it expects the number of properties coming to market to remain relatively low until employers make some sort of final decision on what work will look like.
Tim Bannister, director of property data at Rightmove, said, "[People’s] future housing needs are hard to scope out if it's still uncertain whether the daily commute is soon going to return.
"If it's going to be less restrictive in the long term, then that means less need to live close to transport networks and a greater need for home working space."
Irrespective of what happens, it seems inevitable we’ll be back to near permanent property price growth within a matter of weeks.